Question for those of you who are realtors - a tale of 2 homes

[The Annoyed Man]

I have a question about property tax assessment practices in Texas. Back in California, the assessed value of your home is (or was at the time, unless they've changed things) based on the last purchase price, and the process for raising taxes was convoluted and difficult enough that they don't significantly change over the life of your home's ownership. The reason is that tax rate increases are a political matter rather than an administrative matter, and if you jack up tax rates too quickly, you loose elections. I bought my home in Pasadena, California for $170K and sold it 7 years later for $530K. (I'm not some kind of real estate genius or anything. I was just blessed that my job-related move to Texas happened to coincide with the peak of a real estate bubble, just before it burst.) Despite that significant appreciation over 7 years, my property taxes did not change by more than maybe $100 from what they were when I bought it. Because of the political considerations, gov't can fiddle with the tax rates a little bit, but they can't reassess the home's value until the next time it either sells or goes through probate. So even though I sold a $530K home, I was paying taxes on a $170K home until I sold it, and the tax rate didn't change that much in the intervening 7 years.

So, I realize that the tax offices in Texas are free to raise your property taxes much more frequently, and in larger increments than in California, but upon looking at the tax history for my home here in Grapevine and a friend's home in Colleyville, compared to the assessed value of both homes, it appears that the assessed values have little correlation to the actual values, and that is where the two homes come in.......

My home here in Grapevine was $220,000 when we bought it in 2006, but the $4,439 in property tax for that year was on an assessed value of 201,000. Last year, 2014, we paid $5,732 in tax on an assessed value of $259K, which was also lower than the actual market value at that time. THIS year, we are looking at $6,007 on an assessed value of $284,900, for a house I can sell today for $302K without breaking a sweat. And since I own the house outright, it's all profit. So one of the things that I notice is that, even though the taxes have gone up $1,568 per year in the 9 years we've owned the home, the tax increases have not kept pace with the actual home valuation.

The second home is a friend's home who is considering putting his house on the market. His house is in Colleyville - about 10 minutes from mine. His house is within less than 100 square feet of mine in size (mine is the very slightly larger house, but we're just two people living in it now, and I could lose 100 sq ft and not even notice it). However, my lot size is only 9,330 sq ft, while his is 38,000 sq ft (just shy of a full acre). Now, I realize that some towns/neighborhoods are more desirable than others, and that can affect the appraised value of a home, but in our cases, both homes are located in desirable neighborhoods in desirable cities, in the same county, and in the same school district. Can someone explain to me why the appraised value of my friend's home in Colleyville (same county, and same school district as my home), which he bought in August 2015 for $361K had a 2014 tax bill of only $4,811, compared to my 2014 tax bill of $5,732?

Help me to understand this.

[amtank]

On a homesteaded property they cannot increase the assessment more than 10%. Considering the DFW area appraisal districts you should be lucky that they haven't raised it 10% each year till your house hit the actual market value. Your friends actual tax is higher than yours his house is clearly well under assessed.

[TomV]

City of Grapevine and City of Collyville have different tax rates.

In Plano I have 4 taxing entities. Collin County, Collin College, Plano ISD, City of Plano.

[puma guy]

There are some variables that you may have overlooked. Assuming you've both taken homestead exemptions which lower tax amount, are there any other exemptions ie over 65, disabled, differing city and school district tax rates,etc. I'm sure there will be plenty of replies, but you've discovered why property taxes in Texas a joke. Appraisals are not actually done. There's some abstract process and formula used in my county (Harris) that makes absolutely no sense. The appraisal district rep couldn't even explain it. For example my brother owns a home approx 2500 sq ft. and Tax appraisal value $129,000. I have 2500 sq ft house in much a much older and less prestigious area and my appraisal is $20,000 higher. Both have pools, two story not much difference in the houses, same taxing entities. Really not a tremendous difference in the appraisals, but there's no rhyme or reason to it. Two streets from my brother's home is an exclusive neighborhood with 3300 to 6800 sq ft homes on acre+ lots. Land values are .80 a square foot and a 3300 sq ft home is appraised at $166,000 taxable value. (My land value is $3.25 a sq ft as is my brother's.) When my brother argued his case to the district, comparing the properties the board, they just said it's a different neighborhood - pay up. I have a friend who has taken his appraisal district (Guadalupe Co)to court. He's presently at State District Court level (an ongoing process). He'll lose!

[puma guy]

I could explain quantum mechanics faster.

Just joking, but you dare poke the bear here.

(need a like button)

[baldeagle]

TAM, there are numerous factors that affect home values, too many to discuss here. The first thing you would need to do is compare taxing entities. Along with the state you can have county taxes, city taxes and ISD taxes, and those rates vary from municipality to municipality. Everyone will pay the state rate. Everyone in a county will pay the county rate. But that still leaves city and school district rates, which can vary greatly from one place to another.

Colleyville's tax rate is higher than Grapevine's. so his assessed value has to be lower than yours. http://www.davedowns.com/dallas-property-tax.php

Total City School County
Colleyville 2.32% 0.36% 1.32% 0.64%
Grapevine 2.29% 0.33% 1.32% 0.64%

Based on the rates and the taxes you both are paying, your home is being taxed on a valuation of $262,314 and his is valued at $207,370. Since you state your assessed value is $289, I would assume you've already taken the homestead exemption.

If you're unhappy with the assessment you can protest it. I did that, and mine was lowered substantially. I then claimed the homestead exemption, which limited how much they could subsequently raise it. I protested through email and did not attend the board meeting. I wrote an explanation of how property values for several homes near mine (within one or two blocks) were noticeably lower than mine and included square footage rates to show why and by how much I thought it should be lowered.

http://comptroller.texas.gov/taxinfo/pr ... e_faq.html

http://www.dallasnews.com/news/metro/20 ... rotest.ece

[The Annoyed Man]

TAM, there are numerous factors that affect home values, too many to discuss here. The first thing you would need to do is compare taxing entities. Along with the state you can have county taxes, city taxes and ISD taxes, and those rates vary from municipality to municipality. Everyone will pay the state rate. Everyone in a county will pay the county rate. But that still leaves city and school district rates, which can vary greatly from one place to another.

Colleyville's tax rate is higher than Grapevine's. so his assessed value has to be lower than yours. http://www.davedowns.com/dallas-property-tax.php

Total City School County
Colleyville 2.32% 0.36% 1.32% 0.64%
Grapevine 2.29% 0.33% 1.32% 0.64%

Based on the rates and the taxes you both are paying, your home is being taxed on a valuation of $262,314 and his is valued at $207,370. Since you state your assessed value is $289, I would assume you've already taken the homestead exemption.

If you're unhappy with the assessment you can protest it. I did that, and mine was lowered substantially. I then claimed the homestead exemption, which limited how much they could subsequently raise it. I protested through email and did not attend the board meeting. I wrote an explanation of how property values for several homes near mine (within one or two blocks) were noticeably lower than mine and included square footage rates to show why and by how much I thought it should be lowered.

http://comptroller.texas.gov/taxinfo/pr ... e_faq.html

http://www.dallasnews.com/news/metro/20 ... rotest.ece

The problem is that his appraised value is a lot higher than mine, but his taxes are a lot lower. Same county and ISD. That's what I am not understanding. It's hard for me to believe that the municipal tax rates are that different between the two cities. If they are, then compared to Colleyville, Grapevine is way overtaxed.

[sjfcontrol]

TAM, the tax bills should list the appraised values, the taxing agencies, the tax rates, and any exemptions. That should explain the discrepancies.

[JALLEN]

I can't explain the practice in Texas, but the situation in California is pretty simple.

There, your assessed value is set by your purchase price. The assessed value cannot increase by more than 2% (IIRC) year to year. Taxes cannot exceed 1% of assessed value. This was enacted by Prop. 13 in 1978, the so-called taxpayers revolt. Assessed values are reset by a sale, or a couple of other events. The assessor can lower assessed values, and did so in many areas during rhe market slump.

Assessed values were going up so rapidly in the inflationary '70's that some peoples taxes were more than their mortgages, and many who had owned homes a long time were forced to sell them because they couldn't pay the taxes.